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S&P Global Platts Analysis of U.S. Energy Information Administration (EIA) Data


EIA Data: U.S. crude inventories fall sharply amid healthy demand

John (Jack) Laursen, S&P Global Platts Oil Editor


NEW YORK - July 26, 2017


  • Crude oil stocks fall 25.8 mil barrels or 5.1% in past month
  • Gasoline product supplied second highest on record
  • Imports from Saudi Arabia rebound from seven-year low


U.S. crude oil inventories fell sharply in the week that ended July 21, as robust refinery runs and strong gasoline demand combined to pull barrels out of storage, according to the U.S. Energy Information Administration (EIA) Wednesday and a commentary by John (Jack) Laursen, S&P Global Platts Oil Editor.


Crude oil stocks declined by a larger-than-expected 7.208 million barrels to 483.415 million barrels and have now fallen 25.798 million barrels or 5.1% in the past four reporting weeks.

Analysts surveyed by S&P Global Platts were looking for crude stocks to have fallen 2.5 million barrels.

The surplus to the five-year average for the same reporting week currently stands at 24.37%, down from 25.81% last week and 36.73% at the start of the year.

Refinery throughput rose 166,000 barrels per day (b/d) to 17.285 million b/d, the second highest mark on record. US refineries have run at breakneck rates this summer, with throughput hitting a record 17.510 million b/d in the week that ended May 26.

Refinery utilization increased by 0.3 percentage points to 94.3% of operable capacity. A year ago, the run rate was 92.4%.

The resulting refined product output is simply not finding its way into storage, with U.S. petroleum demand healthy.

Gasoline product supplied rose 229,000 b/d week on week to 9.821 million b/d, the second highest on record, while distillate product supplied rose 42,000 b/d to 43.376 million b/d.

Gasoline stocks fell 1.015 million barrels to 230.196 million barrels and are now 3.85% above the five-year average for the same reporting week.

Analysts surveyed by S&P Global Platts were looking for a gasoline stock drawdown of 850,000 barrels.

Gasoline days-of-demand cover has declined in recent weeks, pointing to a tighter market. Days-of-demand cover currently stands at 23.44 days, compared with 24.65 days in the same week last year and slightly below the five-year average of 23.97 days.

Distillates days- of-demand cover stands at 34.18 days after distillate stocks fell 1.852 million barrels to 149.564 million barrels. That is down sharply from 39.42 days last year and below the five-year average of 35.61 days too.

While days-of-demand cover for both gasoline and distillates are both lower than at this time last year, crack spreads are higher. The front-month New York Mercantile Exchange (NYMEX) reformulated blend stock for oxygenate blending (RBOB) crack spread averaged $19.36 per barrel (/b) in the most recent reporting week, up from $12.89/b a year ago. The front-month NYMEX ultra-low sulfur diesel (ULSD) crack spread averaged $17.62/b in the most recent week, compared with $13.56/b a year earlier.

Total petroleum demand rose 111,000 b/d week on week to 21.289 million b/d, down 4.2% from the record 22.225 million b/d in the week that ended June 30, but still the highest on record for the same reporting week.




CRUDE EXPORTS BACK ABOVE 1 MIL B/D


U.S. crude oil exports rose 302,000 b/d to 1.030 million b/d last week, breaching the 1 million b/d mark for the first time since the week that ended May 26, when exports averaged a record 1.303 million b/d.

Economics to ship crude out of the U.S. remained favorable last week, with the West Texas Intermediate (WTI)/Brent spread widening 10 cents to average minus $2.30/b, while the WTI/Dubai spread grew 9 cents to average minus $1.10/b.

At the same time, freight rates to Asia edged slightly lower, with the Caribbean-China very large crude carriers (VLCC) route, basis 270,000 metric tons (mt), averaging $11.63/mt, down from $12.07/mt the week prior and almost 40% below the 2017 average of $18.75/mt. S&P Global Platts does not currently assess a US Gulf Coast-China VLCC rate.

Crude imports rose 48,000 b/d to 8.044 million b/d, meaning that net imports declined given the jump in exports.
Crude imports from Saudi Arabia rebounded 408,000 b/d from a seven-year low to 932,000 b/d.

Many analysts have pointed to Saudi Arabia's new focus on reducing U.S. surplus inventories, and by extension, exports to the US. Even with the weekly rise, U.S. imports from Saudi Arabia have averaged 769,000 b/d so far in July, compared with roughly 940,000 b/d in June.

At the OPEC/non-OPEC cut monitoring committee meeting in St. Petersburg on Monday, Saudi energy minister Khalid al-Falih committed to capping his country's exports at 6.6 million b/d in August, meaning that US imports of Saudi crude will likely remain low in the coming months.




OPEN ARBITRAGE PULLS JET FUEL TO LOS ANGELES


In addition last week, U.S. West Coast (USWC) jet fuel imports nearly doubled to 205,000 b/d after the arbitrage for sending cargoes from North Asia to the region swung open this month.

The USWC jet imports were the highest since the week that ended December 2, 2016 and the eighth highest weekly total.

Delivered South Korea jet fuel cargoes, inclusive of Medium Range tanker freight, have averaged a $13.69/mt discount to Los Angeles pipeline barrels so far in July, compared with a premium of $4.99/mt in June.

Data from cFlow, S&P Global Platts trade flow software, show the Ardmore Seaventure arrived in Los Angeles from Yeosu, South Korea, where GS Caltex operates a 775,000 b/d refinery. Additionally, the Cape Taft Long Range vessel arrived from Kaohsiung, Taiwan, where state-owned CPC operates the 300,000 b/d Talin refinery.

Meanwhile, distillates exports rose 108,000 b/d to 1.150 million b/d, slightly above the year-to-date average, with arbitrage economics for sending cargoes to Europe favorable in recent weeks.

Delivered U.S. Gulf Coast (USGC) cargoes, inclusive of MR freight, have averaged a $3.37/mt discount to cost, insurance and freight (CIF)-basis Mediterranean cargoes so far in July, while the spread to CIF Northwest Europe cargoes remains at a marginal premium of 41 cents/mt.

Four cargoes carrying refined products departed the USGC for the Mediterranean during the most recent reporting week, according to cFlow data, while another four sailed to Northwest Europe.

Also, U.S. exports of propane and propylene rose 31,000 b/d to 768,000 b/d, with S&P Global Platts data showing arbitrage economics to send cargoes to Japan improved last week.

Delivered USGC cargoes, inclusive of very large gas carrier (VLGC) freight, averaged a discount of $1.18/mt to CFR Japan cargoes in the reporting week, compared with a $6.97/mt premium the week before.


CONTACT
Kathleen Tanzy, + 1 917 331 4607, kathleen.tanzy@spglobal.com



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